2007 Reference Document for Groupe Eurotunnel SA PDF file size

4. RISK FACTORSEurotunnel Group is subject to a specific regulatory frameworkThe unique nature of the cross-Channel link and the exceptional conditions in which the construction and theentering into service of the Tunnel and the launch of its operations have been carried out are such that the operationof Eurotunnel Group’s business is subject to a specific legislative and regulatory environment which is based onone-off interpretations. It is not possible to know whether these interpretations will prevail in the future (in particular,the railway transport directives of the European Commission, which have been the subject of constant change sincethe 1990s).If the application of certain legislative or regulatory texts to Eurotunnel Group’s business were to be modified or ifnew less favorable legislative or regulatory provisions were to be enacted, this would have a negative impact onEurotunnel Group’s financial position.The Eurotunnel Group is exposed to risks in relation to competition regulationThe market, the pricing practices and the behaviour of Eurotunnel Group are monitored, as were those of TNU, bythe French and British competition authorities and the European Commission, which may result in regulatorymeasures being adopted in relation to prices and penalties, proceedings being brought by third parties for damagesand restrictions being imposed on its business activities. The monitoring and resulting regulatory or other measuresmay have a material adverse impact on the financial situation of Eurotunnel Group, its operating results and itscapacity to service its Debt.Eurotunnel Group is subject to a number of environmental regulations which could restrict its activities orlead to significant expendituresEurotunnel Group is subject to French, UK and European environmental regulations as well as local regulations thatrequire it in particular to either obtain authorisations for the disposal of certain waste materials or to enter into acontract with an accredited company for the removal and destruction of waste materials. Any breach of theenvironmental regulations will result in fines for pollution. The regulations also provide that the authorities may forcethe closure of any facility that does not comply with decisions requiring certain environmentally harmful activities tocease or be modified. Eurotunnel Group is maintaining the environmental protection and sustainable developmentpolicy implemented by TNU which is described in section 6.8 of this Reference Document. However there is nocertainty that UK, French, European, national or local authorities will not impose new regulations resulting inadditional expenditures which could have an adverse impact on the results or financial situation of EurotunnelGroup.4.5 Legal risksIn the normal course of its business and in the context of the implementation of the Reorganisation, EurotunnelGroup is, and could be, involved in certain administrative or judicial proceedings. The most significant currentproceedings are described in section 20.7 of this Reference Document.More generally, it cannot be excluded that in the future, proceedings, whether or not related to current proceedings,could be launched against any of the Eurotunnel Group entities, and which, if they have an unfavourable outcome,could have an adverse impact on the business, financial situation or results of Eurotunnel Group.4.6 InsuranceEurotunnel Group has put in place an insurance programme described in section 6.6 of this Reference Documentthat is in line with the current products offered in the insurance market for groups of a similar size, business activityand financial situation.In certain circumstances, payments by insurance companies under the existing insurance polices may not besufficient to cover all of the loss suffered, in particular with respect to third party liability. Losses in excess of theagreed indemnity limits or the application of certain exclusion clauses could result in Eurotunnel Group bearingunforeseen costs or could affect its business, financial situation or results.In addition, changes to the insurance market could lead to an adverse change in Eurotunnel Group’s insuranceprogramme and the terms and conditions of such insurance such as the level of premiums or the level and extent ofany exclusions which would have an adverse impact on Eurotunnel Group’s business, financial situation or results.15